Biggest Financial Losses in History

Year: 2021
Responsible Entity: Gabriel Plotkin
Estimated Losses: $4.5 Billion*

One of the biggest trading losses in the history of the New York Stock Exchange comes to us courtesy of Gabriel Plotkin’s investment management firm, Melvin Capital. To start 2021, the firm held several short positions on which it had bet large. Unfortunately for Melvin, one of its larger short positions was in GameStop.

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Due to an overwhelming push for GameStop by the subreddit r/WallStreetBets crowd in January 2021, the stock shot to the moon and, along with a few other poorly invested short positions, cost Melvin Capital 53% of its assets in just one month.

Year: 1994
Responsible Entity: Robert Citron
Estimated Losses: $1.7 Billion*

The ideal thing for citizens of a county is to have the government continuously improve living conditions while not seeing a rise in taxes. During his time as the treasurer/tax collector of Orange County, Robert Citron took big risks with the county’s money in order to make that happen.

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By leveraging treasury bonds as collateral, Citron built up a hefty profit margin, however, this would only continue to work if interest rates remained low – they did not. When the federal interest rates suddenly rose in 1994, Citron’s risky strategy backfired and he lost the county $1.7 billion. As a result, the OC (yes, the entire county) was forced to file for Chapter 9.

Year: 1980
Responsible Entity: The Hunt Brothers
Estimated Losses: $1.7 Billion*

In a world where everyone is focused on gold, in the late ‘70s, the Hunt brothers went out and purchased a large chunk of the world’s independent silver supply (about one-third). The result was the cost per troy ounce skyrocketing from $6.08 to $49.95 in a little more than a year.

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After the “Silver Rule” was implemented at the beginning of 1980, the price of silver plummeted to less than half its price, and many of the financiers whom the Hunt’s had borrowed from (to make silver purchases) came knocking. As the price of silver kept dropping, the brothers’ losses continued to rise – ending in losses of around $1.7 billion.

Year: 2007
Responsible Entity: Howie Hubler
Estimated Losses: $9 Billion*

Morgan Stanley bond trader Howie Hubler got himself into more trouble than he was able to get himself out of in the early-2000s, when he bet against the U.S. real estate market a few years too soon and needed to find a way to cover his losses quick.

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The solution that Hubler opted for was to use structured investment finance products called CDOs (Collateralized debt obligations) to help save his own backside – it backfired. In the years leading up to the actual housing market crash, Howie Hubler lost Morgan Stanley, approximately, $9 billion.

Year: 1992
Responsible Entity: Louis V. Gerstner
Estimated Losses: $5 Billion*

Thanks to IBM’s early efforts we’re able to withdraw money from ATMs – it invented not just the machine itself, but the magnetic stripe cards we use to access our money as well. The tech company is also responsible for introducing floppy disks and hard disk drives to the world.

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In the late-80s, PC companies began popping up all over the place, and IBM’s CEO, Louis V. Gerstner, opted to stay the course, instead of evolving the company’s business plan. Not taking its competitors seriously came back to haunt IBM a few years later – reporting a then record-setting $5 billion loss in 1992.

Year: 1995
Responsible Entity: Nick Leeson
Losses: $1.31 Billion*

In 1995, Nick Leeson, a Barings bank employee who was stationed in Singapore, put a large sum of money down, hoping that the Japanese market would remain stagnant overnight – which it did not. There is no way to predict what mother nature has in store, and that night the Kobe earthquake struck Japan, causing the market to crash. 

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Each additional move that Leeson made carried more risk and inevitably resulted in a larger downfall for the derivatives trader. His fraudulent and unapproved transactions led to a $1.31 billion loss for London’s Barings Bank and, ultimately, its collapse and closure after 235 years of operations.

Year: 2011-2021
Responsible Entity: Panda Power
Losses: $525 Million*

To help ensure that teachers will have pensions to live off of once they retire, teachers’ unions tend to invest in reliable companies to receive consistently average returns over a long period of time. In 2011, the State Teachers Retirement System of Ohio thought it was making one of those investments with a private equity agreement it had made with Dallas-based Panda Power.

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$525 million of the money that the teachers in the State of Ohio were meant to use for their retirement years was lost the moment Panda Power announced that it could no longer compete with its larger competitors, and closed shop in 2018.

Year: 2006
Responsible Entity: Brian Hunter
Losses: $6.5 Billion*

Amaranth Advisors was an American hedge fund that Nicholas M. Maounis founded in 2000. “Was” being the keyword. In six short years, the hedge fund had built a portfolio of more than $9 billion in assets only to lose most of it in one of the largest and quickest downfalls that a hedge fund has ever experienced.

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One of Amaranth’s traders, Brian Hunter, was looking for a “7″ when he rolled the dice on natural gas futures in 2006 but ended up with“snake eyes” – losing Amaranth Advisors, approximately, $6.5 billion. It’s rather ironic that a bet on “futures” ended up losing Amaranth on its own. The company went defunct a year later.

Year: 2005
Responsible Entity: Glenn Tilton
Estimated Losses: $1.77 Billion*

With fuel prices on the rise in the early-2000s, United Airlines’ parent company, UAL Corp., was watching its profits evaporate and become replaced by insurmountable debts that inevitably led one of the United States’ biggest airlines to declare bankruptcy after reporting a loss of more than $1 billion.

©Adam Moreira (AEMoreira042281) / commons.wikimedia.org

In an attempt to save money from within, although he was receiving a higher annual wage than any other CEO of a major American airline, Glenn Tilton opted to approve the cancellation of pension programs and negotiate lower pay rates for the airline’s flight staff and crew – while not taking one himself. Needless to say, employees were not thrilled with their CEO’s tactics.

Year: 2020
Responsible Entity: Carl Icahn
Losses: $1.6 Billion*

6 years after he had first invested in Hertz, Carl Icahn had amassed 55.3 million shares in the car rental giant – accounting for 39% of the company. For the first 5 and a half years, the numbers in Icahn’s portfolio had grown larger. And then, 2020 happened.

©IgorGolovniov / Shutterstock.com

With global tourism shut down completely in the spring of 2020, and the world in the middle of a crisis it had not experienced for 100 years, car rentals were no longer needed and Hertz’s stock plummeted. Hoping to get out before bankruptcy overwhelmed the company, Carl Icahn sold his Hertz holdings at an incredible loss of $1.6 billion in May 2020.

Year: 1993
Responsible Entity: Heinz Schimmelbusch
Estimated Losses: $1.3 Billion*

At one point in time, Metallgesellschaft AG had more than 20,000 employees spread across 250 subsidiaries worldwide. For years, the industrial conglomerate was Germany’s largest, until its poorly thought out long-term hedge strategy was exposed for the flaws it contained in 1993.

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With CEO Heinz Schimmelbusch at the helm, Metallgesellschaft AG invested heavily in the oil market – betting on short-term gains. Instead, oil prices dropped and when the margin calls came, the company was forced to close its near-term futures contracts at a loss. Metallgesellschaft AG ended up losing, approximately, $1.3 billion.

Year: 1996
Responsible Entity: Yasuo Hamanaka
Losses: $2.6 Billion*

The Tokyo-based Sumitomo Corporation is a general trading company that has dealings in several lines of business but has created much of its wealth in the mineral and mining markets. In 1996, as a result of one rogue trader, the company suffered a fate similar to the one that UBS faced in 2011.

©Parilov / stock.adobe.com

Yasuo Hamakana, a man who was once known for his aggressive yet profitable market strategy, made a few trades on London’s Metal Exchange without the approval of his superiors and ended up losing Sumitomo Corporation $2.6 billion as a result of his rogue transactions. For his actions, Hamakana was given 8 years in prison. He served 7 and was released in 2005.

Year: 2009
Responsible Entity: Real Estate Market Crash
Estimated Losses: $3.65 Billion*

Founded in 2003, Nakheel quickly became one of the largest property developers in Dubai and was landing some of the most lucrative contracts in the quickly developing city. However, by 2009, the UAE was 2 years into its financial crisis and Nakheel was feeling the pain of the hurting real estate market. 

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Due to lower sales and decreasing property values, Nakheel reported a loss of $3.65 billion in 2009. Had it not been for a bailout it secured from Abu Dhabi, the company responsible for bringing the world such beauties as Palm Jumeirah and The World islands would have almost definitely gone bankrupt.

Year: 2006-2008
Responsible Entity: Global Economic Crisis
Estimated Losses: $30.05 Billion*

More than a year before the global economic crisis of the 2000s affected the world, American automaker Ford was already experiencing a crisis of its own. The company reported a loss of $12.7 billion in 2006 – mostly due to a pricey restructuring plan. Unfortunately, that was only the beginning of Ford’s woes.

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After a comparatively good year in 2007, in which Ford lost just $2.75 billion, the global economic crisis struck, in 2008, and the automotive giant was hit hard – reporting the worst loss in the 105-years of the company’s history, $14.6 billion. For those keeping count, that’s more than $30 billion that Henry Ford’s company lost in just 3 years.